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Pass-through Reimbursement for Your NAHE Program

Medicare is the largest single funding source for hospitals that provide training for residents and fellows in approved residency programs in medicine, osteopathy, dentistry, and podiatry. In addition, through the Medicare cost report, Medicare also provides greater than $400 million annually in funding to hospitals that provide training in Nursing and Allied Health Education (NAHE) programs. Assuming the programs meet criteria specified under 42 CFR 413.85(f) or 42 CFR 413.85(g), Medicare will provide reimbursement for the “Medicare share” of classroom and clinical training costs of approved programs.

For some of the more common NAHE programs, e.g., ASHP-accredited Pharmacy Residency and ACPE-accredited Clinical Pastoral Education programs, the costs associated with program directors’ wages, supplies, and annual accreditation are allocated to individual departments and are easily identifiable for Medicare cost reporting purposes. However, costs associated with less common programs, such as CAAHEP-accredited Surgical Technology or APA-accredited Clinical Psychology Doctoral Internship programs, are often included in the patient-care related departments and the cost report preparer unknowingly reports as normal operating costs (not included in pass-through reimbursement calculation). In addition, costs associated with the clinical instructors that spend a percentage of time in program-related activities and patient care require allocations based on rotation schedules and time studies – allocations that are reviewed with much scrutiny by the Medicare Administrative Contractor (MAC) during the desk review and/or audit.

Accurately capturing all costs associated with the program is not limited to direct costs. It is necessary to review all components used for allocating overhead costs (depreciation, employee benefits, housekeeping, and cafeteria) to determine whether the appropriate statistics have been assigned to the program. For instance, the statistic used to allocate cafeteria meals should include amounts associated with students/residents and allocated preceptors/instructors.

For hospitals to continue providing this invaluable training for aspiring healthcare professionals, it is imperative that the appropriate funding is received through the Medicare cost report – and that means after audit adjustments have been applied.

The Rybar Group has worked with hospitals throughout the country to ensure that program costs have been properly identified and captured in past, current, and future Medicare cost reports.